Six Places in the U.S. That Are Tough on Development

San Francisco

Regardless of where the blame lies for San Francisco’s housing crisis, the city needs more multifamily development. And there are many obstacles in the way of building more apartment units. First, there’s an 85-ft. or eight-story limit to building height. Plus, the majority of the city’s land mass is zoned for small structures. That includes many areas along mass transit routes or within pedestrian/cyclist distance of the CBD, so some feel that the mass transit corridors are underutilized. And since there’s no room left for sprawl, the only way left to build is taller.

Meanwhile, despite San Francisco’s strengthening tenants’ rights, affordable housing is also becoming scarce. Some developers feel that San Francisco’s housing activists, who are against creating more market-rate housing, have got it all wrong. These developers believe that building more market-rate units would actually increase rather than decrease affordable housing because, as a condition of building market-rate housing, developers in San Francisco must either build an additional 12 percent to 20 percent affordable units or pay the city 20 percent of project costs.

Phoenix

The recovery from the housing market crash came faster in Phoenix. Today the city enjoys healthy population growth, a robust jobs market and rising real estate values. Surprisingly, however, development isn’t easy in Phoenix. Land prices are skyrocketing, and there’s a continuing shortage of construction workers, since many left town during the crash and are yet to return.

California

Retail developers beware. Three anti-development bills were passed by California’s state legislature in May 2013, and their effects are now being felt by developers:

AB 667 is a groceries union-sponsored bill that prohibits approval of superstores that sell groceries unless it can be found that the store would have no material adverse economic impact on a surrounding five-mile area. The nonprofit League of California Cities (LCC) opposed the bill upon the principle that land-use decisions should be made at the local level, and finds the bill’s real effect is to “create additional grounds for litigation.”

AB 562, sponsored by the American Federation of State, County and Municipal Employees, requires local governments to track and maintain data on all expenditures or losses of revenue for economic development purposes valued at more than $100,000. Plus, the measure requires additional public hearings, biennial reports and publication of information online, all of which the LCC believe will make local economic development efforts “more cumbersome.”

SB 673, supported by the California Professional Firefighters and the California Labor Federation, halts development of any retail or commercial facility project that benefits substantially from financial assistance “including but not limited to” state or federal grants, low-interest loans, land donations or acquisitions or remediation or environmental cleanup activity until an exhaustive analysis of the project is completed.

Boston

If you’re a multifamily developer that supports the inclusion of parking lots, avoid Boston, where city planners are leaning in favor of a car-free city. Boston requires .75 parking spaces per unit for large residential developments, which translates to plans for large-scale housing complexes with few or zero parking requirements in neighborhoods that have multiple public transit options.

City planners say the number of registered vehicles has fallen by 14 percent over the past five years, and that Boston’s burgeoning population of Millennials prefer public transportation, bicycling, walking and Zipcars. But Boston Globe columnist Lawrence Harmon says residents of the suburb of Charleston are angry over a 54-unit apartment building for the Navy Yard that was approved with only 43 parking spaces. Although Portland, Ore., “went down this slick road” by letting developers build apartment buildings with no parking, Harmon writes, the Portland City later Council amended its zoning code to reintroduce minimum parking spaces in future developments. Why? Because Portland’s young singles began buying cars once they settled down and started families.

Detroit

Sure, real estate in Detroit is cheap and easy to come by. Millions of square footage in commercial and residential buildings are sitting vacant, becoming blighted—a problem so endemic that each month, Mayor Mike Duggan hopes to demolish 600 blighted properties (and install 2,400 functioning streetlights). But the future looks bright, with the city’s 2012 master plan calling for increasing the population from 570,000 to 600,000, creating a culture and entertainment district stretching toward the waterfront and reclaiming parkland. So, for developers, what’s left to worry about? As the New York Times Magazine reported last Sunday, “sometimes a wreck is just a wreck; some goods are not a bargain at any price. The risk to Detroit’s new buyers is that they haven’t bought low enough.”

Chicago’s South Side

Chicago’s long-suffering South Side currently has a glut of vacant buildings—estimated to be between 500 and 600 by the nonprofit Southwest Organizing Project—located between Western and Kedzie avenues and between 51st and 74th streets. Those buildings are ripe for redevelopment by entrepreneurs who can envision the South Side finally coming to life. The problem is, nobody, not even city officials, seems to know where the properties are or what conditions they’re in.

In 2011, the Chicago City Council amended the city’s vacant property ordinance to require an expanded class of owners—mainly banks, investors and management companies—to follow the city’s existing rules on registering and maintaining their vacant properties. The city's intention was to make it more expensive for building owners to let vacant properties sit indefinitely and prevent such properties from lowering the property value of entire neighborhoods.

But today, thousands of Chicago’s properties are still unregistered. Not only is it possible that building owners—along with lenders and investors—are escaping paying taxes, it’s certain that developers are being denied the chance to make a go of things on the South Side.

Now that the economy is picking up, so is commercial real estate development. But the ease with which a developer can move from vacant land or empty building to a whole new property varies from one location to another, depending on a particular place’s economy, location, regulations and, well, quirks. Here is a subjective list of six places that aren't exactly friendly to developers. Do you know others? We'd love to hear from you.